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The bullish picture emerges when ETH’s price slide comes to a halt at its old cup-and-handle resistance level, which is now acting as support, indicating the possibility of a major rebound ahead.
Ether (ETH), Ethereum’s native asset, may rebound by roughly 60% in the next sessions as bulls bet on a classic bullish continuation pattern.
Prices may rise to or above $6,500 from their current levels near $4,100 after completing a cup-and-handle formation, hinted Matthew Hyland, an independent on-chain analyst, in a tweet published Monday.
A perfect cup and handle retest
In a corrective move that began after the cryptocurrency achieved a record high of $4,867 on Nov. 10, Hyland’s chart shows Ether rebounding to the original point of resistance of its prior cup and handle pattern (the yellow horizontal line in the chart below) (data from Coinbase).
After testing the cup and handle barriers as intermediate support, Ether experienced a mild bounce, suggesting the possibility of a longer move to the upside.
In more depth, the first attempts at breakouts from bullish technical setups usually require extra confirmation.
Longs who enter deep in the pattern expecting for a breakout (which fails) and longs who chase the breakout but see their little profit evaporate following quick bearish reversals, prompting them to protect their holdings, are two categories of purchasers who are trapped by these early gains.
When a drop comes to a halt in the middle, it might either lead to sideways movement or a full-fledged recovery. As a result, short sellers lose faith in the current bullish technical setup, while longs who survived the last drop gain trust in it.
A positive rebound sets a bullish feedback loop in motion, thus prompting the price to prepare for the final leg in the pattern — a strong uptrend. As Hyland hinted, Ether’s retesting the “huge Cup & Handle pattern” resistance as support appeared perfect — a potential cue for a sharp rebound.
When the price breaks above its resistance level and trade volumes grow, the buy point in a cup and handle pattern appears.
Traders usually calculate their profit target by measuring the distance between the right top and bottom of the cup and then multiplying that value by the buy point.
The cup’s maximum depth is nearly $2,500, while its breakout point is around $4,100. As a result, the pattern’s breakout target comes to be at or above $6,500. A Harvard study shows that cup and handles have a 65% and 68% success rate for forex and stock markets, respectively.
Breaking below the pattern’s resistance level — which also happens to coincide with multi-month rising trendline support — would invalidate the bullish setup. This might push Ether’s price to the next support line, which is about $3,090.